Transcripts For CNBC Closing Bell 20140812

Latest on whats moving your money. Also, backtoschool in full swing across the country. Its the biggest shopping season of the year after christmas, and now analysts at citigroup are saying williamssonoma will be the biggest winner in the backtoschool frenzy. Really . Williamssonoma. You might be surprised to find out why. And would you take less pay if your company gave you a bigger 401 k match . Nearly half of the respondents in one survey say they would. We will give you the details and also give you a chance to vote if that would be the best financial move for you. And in the markets right now, as tyler mentioned, the dows off about 31 points. At the lows, we were off 52. The nasdaq, meanwhile, down about 24, and the s p 500 off 6 1 2 points. And were keeping an eye, tyler, on a lot of individual movers. King digital will report after the close, but otherwise, its been relatively quiet. Indeed it has. Joining our Closing Bell Exchange this afternoon, rob morgue from v2v associates, Dick Burridge from rmb Capital Management, sam stovall from s p capital iq, diane, and mr. Santelli is back. Welcome one and all. Sam stovall, let me start with you, as i know a student of market history. Its been a long time since the market has had a correction. It looked in the past couple of weeks like maybe we were going into one, but then the past few days not so much. If we go so long without having a 10 correction, does that necessarily mean that when the correction comes, its stiffer, harder, worse . I figured you were going to add some more. No, actually, theres no guarantee that its going to be a bear market, even though four times since world war ii that we did go longer than the existing 34 months, which by the way, is three times the median between such decline since world war ii. Of those four times, three of them became new bear markets, but the longest one was from 1990 to 1997, just before the longterm Capital Management decline, and that ended up being a correction, not a new bear market. You know, Dick Burridge, i want to get your thoughts on the ipo market and just how healthy it is. Theres talk about this ipo that existed for six days and then was pulled. Theres been some focus on how poorly some of the smaller ipos have performed relative to the larger ones. Do you get a sense that the jobs act is part of this . Are you worried about this trend . Or do you think overall its consistent with a relatively healthy market here . I think the ipo market is like it always does at this point in the cycle, it goes through ups and downs. It doesnt surprise me that were struggling here when you have some of the higher pe, higher Growth Companies really struggling to move forward, make new alltime highs. I do think acquisition activity is going to pick up, and that will help the ipo market. I really think what we need here you were asking bob a minute ago about the likelihood of a correction turning into a bear market . I think the best thing that could happen for the market today and for the ipo market, frankly, longer term, is to have a meaningful correction to get some of the hot money out of the market and have an opportunity to put money back to work at reasonable valuations. Diane, in my notes, it says you think weve actually had the correction we should expect. I do, and it doesnt mean that we wont have more over the next few months into the end of the year, as theres a little softness at the end of earnings season. But here we have seen, you know, really, earnings catch up with market valuations. So, is a 4 to 5 correction meaningful enough to borrow the prior guests words or do you need something more . Is 5 the new 10 . I think 5 is what weve typically had in most markets, 3 to 5 corrections and were right on schedule for that, in the midst of a good economic and equity year. And so, for now, then, it sounds like youre saying its clear sailing . Well, i dont know about that. Theres a lot of geopolitical unrest, but valuations have come down a little bit, earnings have come up and dividend payout ratios are pretty low, so that can feed still into the system. Rick santelli, are you surprised at the resilience here in markets, broadly speaking . You know, i am a bit. But once again, i think that the highest probability of what happens with equities is as they lose their benefactor in the form of the central bank, the federal reserve, i just think it takes away up side more than it guarantees a huge down side. So, i think its about the angle of the glide path thats going to change moving forward. On Interest Rates, todays a fascinating day. It looks to be the eighth day were going to close the tenure in a tight range between 2. 41 and 2. 49 , but since thursdays lowyield close going back to june of last year, which was 2. 41 , this is the highest yield close since then, and 2. 44 , where we sit now, was the previous or excuse me, low yield close of the year. Why is that significant . Because volume is so light everywhere that traders are going to have a real important decision to make. Do they reverse the trade and get back out of some of these newly established longs or do they hold on . And that would be significant, because we have a lot of important data points and auctions. Tomorrow will be a tenyear auction. And we get july retail sales. So, this is going to be the first month of the Third Quarter data, and it will be of extreme importance in front of gdp out of germany on thursday. Rob morgan, meaningful or not, have we had the correction that we should anticipate for the next few months . And whether we have or we havent, do you like stocks at these prices . And if so, what categories . Yeah, ill tell you, tyler, it wouldnt surprise me if we got some kind of pullback Going Forward into the fall, but what im focused on is the fact that, you know, we continue to have a healing economy here. Weve had six straight months of job growth over 200,000 per month. Thats the first time weve had that since 1997, so i do like stocks here and i like the cyclical sectors. I like industrials, financials and technology. So, yes, could we have a pullback . Sure. But i think in the long run, even with that, things look pretty positive for stocks. And rob, i have to imagine that you saw the same positive trends in this survey this morning of job openings and labor turnover. A little bit of a lagging gauge, but an important one that did show on top of what weve seen in the month or two prior to that a noticeable pickup in job openings in this country. Yeah, kelly, absolutely, and obviously, thats a positive thing as well. Its going to, hopefully, lure people back into the job market that got discouraged. And then, hopefully, well start this Virtuous Cycle at some point where more jobs means more demand means more hiring, and its a virtuous circle. But were certainly not quite there yet. Diane, can stocks continue to rise if Interest Rates do . Absolutely, because it means that if Interest Rates are rising, its because the economys definitely gaining traction. So, we do think the market can continue to rise. Im going to pull a Bill Griffeth here and ask if we can show everybody for a second how many, with a show of hands, think the big decline in the german zew index this morning was a big deal and potentially a new hurdle for the u. S. Market here . No hands . Nobody. Was that a hand . Theyre sitting on their hands, kelly. So, just to refresh people as far as what were talking about, the German Market has underperformed this year. And in fact, for a while it was correlated with the u. S. Selloff. So, diane, big drop in Investor Confidence today in germany. Theyre certainly feeling the impact from whats going on with regard to the sanctions against russia. And yet, nobody appears to be that concerned about it. Well, 8 to 10 of s p sales are europeanrelated. And while we are a little bit insolated from the troubles in europe right now, certainly, some of the companies do sell over there and a slowdown would be negative. Sam stovall, if you had to choose between value and growth, which and why . Tyler, id be going for value at this point. Specifically, im looking at the s p 500, 400 and 600 pure value indices, which also are mimicked by guggenheim etfs. The feeling basically is here youre looking at low Valuation Companies that are having a good technical uptrend, that if you are going to be sticking with stocks, even though a correction, i think is still looming where do you find those values, what categories, where . What categories . Yeah. Value no, no, where are the values greatest . I mean, is it financials, banking, what . Energy . Oh, i was speaking specifically about certain etfs that are whats called pure value for large and small caps. Usually you will find value in some of the financial categories, some of the more defensive areas, whereas the growth of more traditional discretionary. I understood you were talking about etfs. I was trying to get to another layer of exploration. Let me going goe back to one people love to talk about right now, which is merger and acquisition activity. How do you play this space . Do you buy some of what you think might be the likely candidates . Does everybody win . Does nobody win . Give us your take on how investors can position for this wave. Well, i think that the key here is going to be a pickup in demand. If you can start to see the top line grow in certain industries, i do think youre going to see confidence build up that merger and acquisition activity will increase. Youre seeing it in the Banking Industry with small and midsized banks. You saw the headline this morning in the wall street journal that bank profits are almost at a record high. Thats a good sign for the economy. I think that industrys going to continue to see consolidation. And when you start to see profits accelerate in other industries, youre going to see m a activity increase as well. Justin lay hart has a nice piece about the quick ratio and how assets can be converted in the case of a takeover, so it could be happening, but well leave it there for now. Good to see everybody. 50 minutes to go and the dows only off about 13 points. Well watch and see if it can turn positive at all this session. The s p 500, the nasdaq also still negative. Tyler, the dow was positive, albeit slightly early today at a session high of 19. But modest losses at this hour with about 50 minutes to go. Coming up, blackstones vice chairman byron wien weighs in on the markets. Always interesting. Find out if he sees a correction heading our way or if that pullback we had just a couple weeks ago was it. Blackstone oversees more than 200 billion in assets, so you may want to listen up. Also on the docket, king digital posts results after the close. Well tell you what numbers to watch out for and get them to you the second they hit the tape. Find out if the candy crush maker can crush forecasts or be crushed. Up next, the ceo of dominos pizzas will give us his take on the economy and where in the world hes seeing the hottest growth these days. Boy, does that look good. Well be back in a minute. I make a lot of purchases for my business. 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Dominos pizza, with locations across the world on Six Continents has been an innovator on the food landscape for decades, continuing to post strong earnings quarter after quarter by utilizing groundbreaking technology and reaching new customers amid a landscape with more and more challengers, including names like chipotle looking to get into the fast casual pizza concept. Joining us for an exclusive interview to talk about all this and more and most especially the cinnamon sticks that i love is dominos ceo patrick doyle. Mr. Doyle, welcome. Thanks. I have your app on my phone. I love it. It is really handy. How important has that app and digital been to your ability to post the kinds of numbers youre posting, numbers that most restaurant chains would love to have . It has clearly been a big driver for us, tyler. Really, its remarkable. Were now doing about 45 of our business on digital. So you know, we are almost officially an Ecommerce Company now. So you know, globally with retail sales of 8 billion or so, you know, were doing 3 billion plus on digital. Wow. Happier customers, higher ticket, better repeat, higher frequency. Its been a big, big driver for us. And you want to get that number to 50. How soon is that going to happen . I think its coming up pretty quickly. This year . Yeah, you know, we might. I mean, well see how it goes, but yeah, its continuing to push. Its been growing every quarter for us, so were really happy with the progress. Is there much of a difference in terms of your earnings from tyler, who may call and order cinnamon sticks and go to the store and get them versus using the app . Its a little more profitable order for us, but their really big driver is the customers error rates are lower because theyre taking their own order, the tickets a little bit higher. So, its really about driving more occasions for customers is really the big benefit for us. One of the things that people in the Restaurant Business are always and maybe most especially this year worried about are rising commodity costs. Where are you feeling it and how do you deal with it, or is it really a wash because you pass along a lot of those costs to your franchisees who buy a lot of stock and products from you . In the shortterm, thats mostly within our franchisees p l, not in ours as much, but over the long term, it matters. Our franchisees have to be making money. Thats whats going to drive store growth. If they see a good investment, theyre going to build more stores. So, its very important for us. Weve had a little bit of a ticket increase this year, but overall, profits at the store level continue to be very strong, so our store growth has been quite good so far this year. Im looking just for the number. You see between 4 and 6 commodity price inflation. Is that still the case today . Because look, weve had some big moves, and i think some of the cornwheat space moving even lower recently. Right. So, has that 4 to 6 range changed . No, were still in that range. The one thats been stubbornly high is cheese, and thats usually 45 of our food costs. Were surprised, frankly, given that corn has moved down, and ultimately, corn is kind of the big input for the cows. Were surprised that cheese has stayed quite as high as it has. Its been down a little bit, but last week or so, it bumped up again. So, what kind of pricing sorry, tyler. What kind of Pricing Power do your franchisees have to pass on those rising costs for cheese to the customer . Yeah, i mean, very little right now. I mean, the answer is weve got a little bit of ticket increase. Digital has been a part of that. Our ticket is a little higher on digital. So, as people shift across there, we get a bit of a bump on ticket, but the consumer, you know, is still cautious. Can we talk about franchisees for a second . Sure. So, you guys are 95 franchisees. Right. A worker suing i think mcdonalds was able to hold the parent liable, and not just the franchisee. Huge deal, and its got people talking about whether after a lot of companies doing what youve done, going almost fully to the franchisee model, if the pendulum may start to swing the other way. Yeah, thats going to get appealed in circuit court. Well see how that plays out. Thats going to take a long time. But there are i think almost 20 Million People working in the franchise industry, Small Business owners. At the end of the day, franchising is incredibly important to the u. S. Economy. I think at the end of the day, theyre going to get this one right. But is it important to dominos . Oh, absolutely. Why is it so important to remain a franchise model, even if you see writing on the wall to the extent that you do in a ruling like this . Local ownership, being part of the community, its important. And that energy i mean, over 90 of our franchiseies started as hourly workers in our stores, worked their way up through. Theres an energy and a passion there thats hard to replicate with people who work for you. So, we think its very important. Im hopeful that theyre going to get this one right before were all said and done. 90 of your franchisees began as hourly employees in your stores . Thats exactly right. Almost all of them is drivers and they stayed in the stores, they worked their way up, managed the store and then bought a store and grew from there. Wow thats a stunning number to me, and i think, you know, a very flattering one for you. Let me ask you who you have your eye on. I know you have your eye on all of your competitors, most especially what are described as the fast casual chains like a chipotle. Theres no secret about how to make a pizza. I went to italy a couple months ago and they taught me how to make a pizza. Anybody can do it. Doing it well is another thing. A lot of people do it in their backyards these days, yeah. So, what about chipotle and the fastcasual and the other competitors . I think when you look at whats driven fastcasual over the past decade, its really been about a few things better food, more attractive environment, getting people through quickly and the convenience of that, and still good value. Maybe a little bit higher price, but good value. Were doing that in our stores. You know, were opening our stores up, were redesigning the stores, were very fast and we bring technology. So, we think were very, very well positioned. Is it delivery . Is that why you feel so confident that at the end of the day you are the guys putting that product right in front of the consumer . They still have to go to some of the other locations, each if its a chipotle. Is that why you feel so confident . Yeah, there is nothing more convenient than being able to sit at home, to order on your cell phone or over the internet or to call in, have it delivered to you, you know, still usually in under 30 minutes. I mean, its very, very convenient. We think its powerful and were pretty confident about where we are. I feel like the rest of the Retail Industry is going to follow that model here as well. Patrick doyle, thank you so much for being here this afternoon. Thanks, kelly. Ceo of dominos pizza. Weve got about 38 minutes before the closing bell. Modest declines for the dow, about 20 points. The nasdaq down 21 and the s p off about 5. In the meantime, citigroup ranking williamssonoma as its top pick for this years backtoschool season. Yeah, williamssonoma not necessarily the first retailer youd think of in the backtoschool category. Well have the pros debate why this makes sense, next. And later, russian president Vladimir Putin versus fed chair janet yellen. Find out who wall street pros are keeping a closer eye on these days. Well be back in a minute. Moderate to severe is tough, but ive managed. I got to be pretty good at managing my symptoms, except that managing my symptoms was all i was doing. When i finally told my doctor, he said my crohns was not under control. He said humira is for adults like me who have tried other medications but still experience the symptoms of moderate to severe crohns disease. And that in clinical studies, the majority of patients on humira saw significant symptom relief. And many achieved remission. Humira can lower your ability to fight infections, including tuberculosis. Serious, sometimes fatal infections and cancers, including lymphoma, have happened; as have blood, liver, and nervous system problems, serious allergic reactions, and new or worsening heart failure. Before treatment, get tested for tb. Tell your doctor if youve been to areas where certain fungal infections are common, and if youve had tb, hepatitis b, are prone to infections, or have flulike symptoms or sores. Dont start humira if you have an infection. If youre still just managing your symptoms, ask your gastroenterologist about humira. With humira, remission is possible. Welcome back. Red arrows but only a slight negative at this point for the major indexes. Well, the nasdaq is off 0. 4 , the nasdaq off 12, the s p off four points, tyler. Dominic chu is running through the market movers. A reversal of fortunate for kate spade. This stock opened higher this morning and fell toward session lows when they warned Gross Margins for the full year would fall as it faced increased competition. The stock is down over 26 , losing a quarter of its value. Michael kors also fell in sympathy. It had its own margin pressures when it reported earnings last week. You can see there down 3. 5 , one of the worst performers in the s p. Twitter is moving higher after the company unveiled and promoted video ads. The stock you can see there up about 1. 25 . Twitter shares. Gravitys hitting tech near pharmaceuticals. This is the maker of that experimental ebola developmental drug. Its falling as investors are taking profits here. Remember, its recent runup was huge over the course of the past couple weeks. You can see their shares down about 20 . And well end with schlumberger losing ground after it became the first u. S. Company to announce sanctions against russia. It will hurt its actual bottom line, shave pennies off eps. Thats down about 1. 25 . Tyler, kelly, on todays trade. Back to you guys. Dom, thank you very much. Citigroup names williamssonoma as its top backtoschool pick. So, is the Company Really a stock poised to benefit from the backtoschool shopping season . Here to discuss is anthony chakumba with Bb T Capital Markets and jamie katz, an xt analyst over at morningstar. So, anthony and jamie, welcome to you both. Anthony, first to you. Does it make sense to include the owner of williamssonoma and pottery barn as a top backtoschool pick . Why . Im really scratching my head on this one. Dont get me wrong, i really like williamssonoma. I have a buy rating on the name. I think they have great brands. Theyre the premier omni channel retailer, topnotch Management Team, strong free cash flow. Backtoschool play, not so much. I just dont quite understand this call, to be perfectly honest with you. Jamie, i know that if you have children, youll be running out for a waffle iron or espresso machine for your third grader from williamssonoma, right . I think we agree on a lot of fronts with what was just said, in that this is really a parentdriven business. And so, where they stand to benefit from the backtoschool season is that they arent really targeting teens as much as they are targeting parents with the namesake williamssonoma and pottery barn brands, you know, having the lions share of the footprint. Well, is that the story here, that its going to be a foot traffic kind of thing . In other words, when people and i remember this was the case with the womens retailers in past years. It was kind of, you want to own ann taylor in backtoschool season simply because moms might be out in the mall. Can you make a foot traffic argument for williamssonoma, jaime . I think were less positive on foot traffic for malls, but i think whats really interesting about the business is that it has carved out a really special place for direct sales. And with 50 of the business coming through direct channels, they really get to have a much leaner operating profile than some of their competitors. Anthony, let me you like williamssonoma, you say, and you like the multichannel, you like the fact that theyve got pottery barn kids, pottery barn teen, which i think is one of the thesis of the citigroup argument, but you dont favor it as a backtoschool play. So, the natural question would be what do you favor as a backtoschool play . One name we really like right now for back to school is five below, the teen and preteen retailer. The economic environment continues to be quite challenging, so i think the fact that the consumer, either the parent or the child can go to five below and spend 5 for a backpack, 3 for a calculator, 2 for a lunch box, thats pretty compelling, so i think that makes a lot more sense for back to school than williamssonoma. Jaime, what about you . I think tjx has been one of the top picks for the consumer team. I think that the Price Sensitivity is something that resonates across what were seeing as well. So, looking through that offprice channel, a company like tjx would really stand to benefit in the period ahead. Ooh, all right. Anthony, how do you handicap . You know, weve heard in the retail area some people saying, hey, the consumer is in a funk. A lot of the Office Product stores seem to be, which would be a natural place for back to school, seem to be struggling. How do you see the consumer right now . I think that the consumer is getting a little bit healthier. I mean, were certainly seeing better employment numbers, were seeing stronger Consumer Confidence numbers. Consumer credit is rising. The Housing Market seems to be hanging in there, but theyre still very, very cautious and theyre still looking for a deal. We have a greater level of Price Transparency than weve ever seen. You mentioned the retailers. We did a backtoschool pricing study and found on average their prices were significantly above walmart, significantly above amazon for back to school, and we just dont think thats a very good thing. Well, and a lot of those names in the red today. Well leave it there for now. Thank you both. Anthony chucumba and jaime katz of morningstore. The market is off about 32 points. The nasdaq is off 20 and the s p 5. Byron wien will speak with us on the markets, the economy, fed policy, geopolitical trouble spots and a heck of a lot more. Dont go anywhere. What if there was a credit card where the reward was that new car smell and the freedom of the open road . A card that gave you that im 16 and just got my first car feeling. Presenting the buypower card from capital one. Redeem earnings toward part or even all of a new chevrolet, buick, gmc or cadillac with no limits. So every time you use it, youre not just shopping for goods. Youre shopping for something great. Learn more at buypowercard. Com welcome back. Youre taking a look here across markets, despite a big drop in german Investor Confidence this morning. Some better Economic News in the u. S. The uptick in job openings, thats what the markets digesting with the dow off 19 points or so this hour to 16,550. The equity markets are off their record highs with the talk on the street of a major correction seems to be tapering for now. The dow down just a little more than 2 over the past month, despite major geopolitical tensions after dropping nearly 5 at the lows. Our next guest says not to be surprised, though, if the markets do head a little bit lower but that those dips provide buying opportunities. And joining us now in a cnbc exclusive is byron wien, vice chairman of blackstone Advisory Partners. Byron, good, as always, to see you. Well tackle, im sure, some of the geopolitical things in the time we have, but i want to begin with earnings, which have come in pretty nicely in the Second Quarter, but are they as strong as they appear . Theyre really not. If you look at net income, that is probably up about 4 , but earnings are up twice that or even more. Thats because of share buybacks and other accounting techniques. So, earnings per share look terrific, but Corporate Income is not as impressive. Revenue doesnt look bad, though. Revenues okay, but youre not likely, kelly, to get much margin improvement. So, you really need even better revenue increases to keep this up. But isnt this what we want . Arent we at the point wed want to be . In other words, first youd have Profit Margins improve, earnings rise, and then finally, towards the middle to later stages of the recovery, revenue starts to increase, and then the hope is that the better macro keeps those revenue increases going, even if Profit Margins then are coming down because people, frankly, have more disposable income . Lets hope thats the way it works out. I do think the second half is going to be a whole lot better than the first half. I think the economy can grow at 3 during the second half, and if thats the case, i think earnings will keep up and revenues will improve. What price do you think investors are going to be willing to pay for each dollar of earnings . Were right now at what, 17 times trailing earnings . Do you see that, the multiple expanding much . I do. Bubbles occur at 25 to 30 times. I dont know or think were going to get there. I dont think we should get there. Thats bubble territory where the market is really vulnerable. I think what we should get to is 20 times. And that puts the s p where by year end, or at that point of which its 20 times . The consensus estimate is about 115, so that would be 2,300. And were at 1,932 now, so that would be what, a 20 return for 2014 . Thats right. It would be a 20 return. Now, maybe it wont get there, but i do think the markets going to end higher than it is today. And byron, there are a range of factors here that are common talking points. There is the fed, there is woeful situations internationally to be aware of. Theres plenty of other things that people could be worried about. What keeps you up at night and how does that factor into where you see equities going from here . Well, the fed doesnt keep me up at night. I think the fed will remain somewhat accommodative. Obviously, the tapering will end in october, but i think it will be the middle of next year before we see rates rise. So, im not worried about the fed. I am worried about all the geopolitical things, you know. Right now, the market is saying that all of these things are going to work out favorably. Thats ukraine, israel gaza, syria, iraq, iran, south china sea. Well, maybe most of them will, but if one of them flares up, if the price of oil shoots up, that could create a calamity in the market. So, thats what keeps me up at night. But as you look at those things, in one of the papers i read that you wrote, you do tend to think that most of those issues are solvable, at least in the short term. Particularly, you dont think that putin will do something in ukraine potentially until after the turn of the year. Thats correct. I think israel gaza i mean, i think all of these problems are going to be with us at least for a year, but i think theyre going to be reduced in intensity over the next year, and therefore, i think the market can move forward. But the question was what keeps me up at night. Right. Right. Im not right all the time, tyler. The unanticipated upset would be the thing that could take this rather more complacent market down rather more drastically. Right. I still think that sentiment is too positive and we have to correct some of that. So, i still think the correction could go further. Byron, what about getting more long term, beyond 2014 . Do you have a sense of where equities could ultimately go . I mean, im just thinking about some of the calls weve had lately on, you know, this expansion going another several years and that, you know, usually when the fed raises rates, even that isnt the end of the cycle for equities. And you know, will the s p be at 3,000 before its back at 1,500 . You know, those kinds of things. Can you just give us a sense of how big picture you see the stock market from here . Well, kelly, at my age, i take it one year at a time, but i can tell you that the Economic Outlook right now is pretty favorable for the united states. But there are some signs that europe is slowing, that chinas too dependent on debt creation for growth. So, we really need a worldwide expansion in order for the u. S. To continue to do well. The u. S. Cant do well on its own. Right now i think world growth looks okay, but if that changes, that could darken the outlook for the u. S. Over the next year do you think the u. S. Market is, of those ones you mentioned, europe, asia, china, the best . Absolutely. Are you concerned, byron, by the drop in german Investor Confidence . I know ive mentioned it a few times and its going to be more important to see how confidence there is broadly and, of course, the impact russia has when we start to get the data, but are you concerned were already seeing a bite, and that if europe does slow, thats a worry here for the u. S. . Well, kelly, i have a sharper view than you on that. I think germany calls the shots in europe, and i want mario draghi to become more expansive in monetary policy. If Angela Merkel is more concerned about german growth, shell put pressure on mario draghi to be more accommodative, and i think that would be good for germany and all of europe, and that would step up the European Growth rate. I know youve always got an idea, byron. Whats a great idea to either help me make money or avoid losing it over the next year . I think there are going to be a lot of new drugs introduced in most of the major diseases. I think the biotech area is very favorable. In spite of its recent correction. I was going to say. All right, byron i knew, kelly, you were going to hit me with that. No, its just, its tough, because a lot of people at home, its a space, you know, theyd love to play. Frankly, its an area that you want to put capital to use but worry that youre going to land on the mine instead of in a safer part of the field. Well, not everyone is going to be a winner, but there are going to be some big winners out there. And we hope winners come out with treatments that can solve a lot of whats ailing us. Byron, thank you. Well leave it there for now. Byron wien is blackstone Advisory Partners vice chairman. And we have about 20 minutes to go into the close and the dow almost positive, tyler. All right, up next, makeorbreak time for candy crush. The creator of it, king digital. Our Morgan Brennan previews the numbers to watch ahead of kings Earnings Report out after the close. And later, would you take a cut in pay for an increase Company Match to your 401 k . This is a hot issue. Well be taking a poll in the next hour of the show. You might be surprised how many people already say they would. The address for you to make your voice heard, cnbc. Com vote. We will be right back. And cialis for daily use helps you be Ready Anytime the moment is right. Cialis is also the only daily ed tablet approved to treat symptoms of bph, like needing to go frequently. 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Well, dow industrials have turned positive by about a point, almost two points right now. Twothirds of a point. Just barely hanging on by the fingernails. The s p and the nasdaq remain slightly lower, kelly. Art cashin saying the buy orders on the close had gone from Something Like 600 million to 300 million, that, perhaps, helping here, as weve got about 15 minutes to go. Were awaiting results from king digital, hitting after the close. Morgan brennan has a preview of what to watch for. Morgan . Thanks, kelly. Well, this is the second time the video game makers reporting Quarterly Results since going public in march. So, estimates are calling for 59 Cents Per Share on 608 million in revenue. Bookings and active users will also be in focus. The street is looking for gross bookings of 640 million, mostly from mobile, and 155 million daily active users. Analysts tell me theyre expecting bookings for kings biggest title, candy crush saga, to continue falling but should be offset from farm heroes, pet rescue and bubble witch earnings. The biggest problem for king is overcoming its one hit wonder status, so were watching the pipeline closely. Also, keep an eye on customer rising acquisition costs and any comments on the stock lockup expiration next month. Analysts say that should be a major concern for investors. So, coming into the earnings later today, that stocks been trading largely flat, down about 0. 3 . Kelly, back to you. Morgan, thank you very much. Weve got about 16 minutes before the closing bell, and the dow is positive by just about a half point. S p down two. Nasdaq down 11. Coming up in the next hour of the show, putin versus yellen. Who do you think wall street is paying more attention to . The pros weigh in. Over 1. 2 billion eyeballs are on us during the two weeks at wimbledon. 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And joining us now to take a look at how the markets are doing, doug woefld from convergent Wealth Advisers and Peter Anderson from Congress Wealth management. Welcome to you both. Doug, id like to begin by asking you about one of the themes in your notes, or the note that was supplied to me, and that is that you think as a contrarian play commodities may be a place to go. Why . Absolutely, i do. One of the things we have to look at right now is the fed says that inflation is low. Anybody whos put children through college knows that cpi has nothing to do with actual inflation. So, number one, i think commodities are a great inflation hedge, a great macro hedge. Geopolitical concerns, problems in the ukraine are playing into our strategy of having a dollop of our portfolios in commodities and especially in energy. So, i think its a great place to be and a safe place to be Going Forward. Doug, do you still own buffalo . You know, i still own shares in the north American Bison cooperative, but the buffalo turned out to be more of an investment of passion than a true investment. Peter, i dont know about your cattle raising habits or anything, but can you talk about the industries where you see potential and respond to what byron wien just said about investing in biotech, that an attractive area to him. Yeah, i think that biotech is always attractive. Its a little bit challenging to actually analyze those companies. We tend to stay away from them because were not specialists in that industry, but to dougs point, when youre looking at inflation, theres been a lot of nay sayers right now about heres another contrarian play highyield bonds, because people are running away thinking that as Interest Rates rise, highyield bonds might get smoked. However, if you have a little bit of inflation and Interest Rates rise just a little bit, then youll still have some Pricing Power on these highyield bonds and you actually can see some improved financials. But peter, isnt the real opportunity because we just saw people piling out of them the same way they piled out of muni bonds, and that ended up being an excellent trade after that exodus . Thats right, and munis are a different animal, though no, im just saying for the people looking at high yields today, its almost less about fundamentals than the dislocation by everyone jumping out. Thats right, and thats when i get excited, when you start to see these contrarian plays. When people are jumping out and you ask them, why are you selling a highyield bond, if they dont have a clear answer about the specifics of the company, i would say you have to look a little bit more deeply as to what the rationale is, because as i said, a little inflation, Pricing Power, top line, and that gives you some better credit protection. And i would say if highyield bonds start trading off more, start digging deep, look at some of these individual securities and possibly buy some. So, doug, commodities as a contrarian play. What else would you be suggesting i look at in todays marketplace . Well, i really like health care. Right now there are certain parts of health kaer. I like hospital systems. I like concierge medicine. I like patient recordkeeping and security, remote diagnostics. I think the Affordable Care act has picked some winners and picked some losers. I think traditional doctors, traditional insurers and, unfortunately, Home Health Workers i think are the losers, but i like those other spaces quite a built. What about biotech . Same question we asked byron wien. I think its a little frothy, to be honest, and i think the 3. 5 tax leveled on medical Device Manufacturers in the obamacare legislation is going to cool innovation there. Peter, lets talk a little bit about the macro risks in the marketplace, starting with the fed and moving sort of around the globe a little bit. I dont mean for you to identify all of them, but as you look at those risks, how worried are you about them . Well, as you know, im a pretty intense fed watcher, and i think that unlike most other people out there, i am thinking that maybe she might raise rates in a shorter time period than most people think. So, im thinking the beginning of next year there could be some very strong signs of economic improvement. And then i think rates might actually be jacked up a bit. That could be a risk. Some people might think that. But let me just turn that on its signed say that if rates are rising, thats still a good thing for the economy. I mean, ive said that in the past and i do think equities might trade off as a reaction to that, because weve had a dress rehearsal for this activity several times so far, and weve always seen as rates are hinted of raising, that the equity market might trade off. And i dont think that thats the right way to respond. I think that thats a positive thing if we were to raise rates. True, true. All right. Well leave it there for now, guys. Thank you. Thank you. And when we come right back, we will have the closing countdown. Then after the bell, yes, candy crush maker king digitals expected to post results. Well bring you the numbers and look at what they mean for the stock. Is this just a one trick pony . We could be finding out in moments. During the cadillac summers best event, lease this 2014 ats for around 299 a month and make this the summer of style. [b ll rings] time and sales data. Splitsecond stats. Its so close to the options floor, youll bust your brainbox. All on thinkorswim, from td ameritrade. Well, there are small losses for the dow, the nasdaq and the s p 500. So, as we round in on the closing bell with bob pisani, i guess the question, bob, is could we rally as we come in here and make it, what would it be, four in a row up . Yeah, small chance of that happening. Theres a couple of Little Things in the market i want to point out, tyler. First is brent crude is essentially at new lows for the year, and this is putting pressure on the energy sector. So, in the u. S. , weve got enormous supplies, thank heavens, of crude oil as well as natural gas. That is very good news, but that supply pressure is problems for people who are investing in the business. Thats why were seeing these oil stocks that are under pressure hurting the dow today. Also, demand is fairly low worldwide for a lot of this crude product thats out there. Thats what putting out there you see brent. Thats a new low for the year. The other thing i want to point out is whats going on in japan. Well get to gdp figures for japan tonight, and theyre probably not going to be very pretty. Remember, japan has this new sales tax, and a lot of people bought products ahead of the sales tax. Now the sales tax is coming in and theres a lot of talk that the gdp is going to be notably on the negative side tonight. So, keep an eye on the nikkei. And thats been a notable underperformer, and i think the people there, and certainly the leadership, are going to have to deal with the implications of that sales tax. So, a couple of things are moving here. Oil is really an interesting thing to watch right now. One of the things that the not moving. No, its not. You had a good point earlier. I heard you say this sounded very much like a typical august day today. It very much was. I know you and sue were talking about that earlier. And the answer is yes, thats definitely happening, but theres also other Little Things that go on inside the market here, Little Things like the oil moves that i think are worth paying a lot of attention to. So, theyre watching oil down there. Whats the next other clue that the folks you talked to, and i know you talked to a lot, have their eye on . Well, i think the big thing will be the retail numbers were going to see. All of the Department Stores are going to start reporting in the next several days. The general feeling is some of the big names like macys, which has become a big, essentially discounter, are going to do well. Others are going to have some really rather difficult things to say. And bob, thank you very much. Okay. The bells are about to ring on wall street and at nasdaq. Happy people clapping there to ring in, ring out the trading day. Thats all for me. In for Bill Griffeth, im tyler mathisen. Kelly evans will take you forward in the second hour of the closing bell. Thank you, tyler. Welcome to our viewing audience and welcome to the closing bell. Im kelly evans and heres how were finishing the day on wall street. The dow tried to turn positive there at the close but it just doesnt look like that happened. Gave up about eight points. The nasdaq off about 12. The s p off about three, 1,933 is the level there. Lets talk about it with our closing bell panel. Joining me is cnbc contributor carol roth, shark tank tv personality kevin oleary, our own sharon epperson, and joining us to wrap up the days action in the markets is fast money trader brian kelly. Welcome to everybody. Brian, not a ton of movement on stocks today. Perhaps the most noteworthy thing is the fact, as bob just mentioned, we saw crude moving lower. In fact, brent is at one of its lowest levels of the year . Who would have thought against this back drop . Right. I mean, the fundamental support lowered oil prices, and when you think of whats going on geopolitically, most likely the last thing that any countrys going to do is cut off their oil supplies, whether it be iraq, whether it be russia, whether it be anything in the middle east. All those countries rely those oil revenues. So, thats the last thing theyre going to do. Brent is actually very interesting because it broke some significant levels today. Weve been trading in a range for the last couple years, really. Now were starting to get that breakdown. That could be significant in the oil markets. Weve got to think through the Consumer Impact already, but sharon all right, so, we closed just below 103 for brent. Are we going below 100 . It looks like we could perhaps go below 100, but whats more interesting for the consumer is gasoline, diesel, jet fuel, theyre at fouryear lows for this time of year. When you look at the fact that gasoline prices right now are 15 cents lower than in july, youd think consumers would be elated. But yet, theres a survey out today that the Convenient Store owners did that show more pessimism than in july. So, i think all of the geopolitical Events People are watching and the fact that they still dont think they have enough to make ends meet in some cases, lower gas prices arent helping. True. You know, its funny, you focus on the consumer and gas. I focus on the consumer and fashion. And to me, the name that stood out today was kate spade talking about margin pressure. And i think margin pressure is the untold story were going to be hearing in the back half of the year. All of these companies that were able to raise their margins in the face of not being able to raise revenues over the last couple years now have nowhere to turn in terms of margins, and i think thats something were going to continue to see pressure, probably not just in the fashion industry and the Retail Industry, but across all industries. Do you agree, kevin . Were halfway through the game, and i think thats a very good comment regarding margins. I say halfway through the game, i mean earnings. Were halfway through the year. I believe it will get to 115 in earnings. So, now when i need to expand and get more value is i need to see the pes go up from 17 to lets say 21 times. I cant get more margin. I need more pe expansion. How do i get there . Well, looking at shares of king digital, i dont think youll find much of it there, down 13 after hours. Looks like revenue was a miss. And well have more details for you shortly. This, again, one of the names this week as we look to wrap up what kevin was just mentioning, the Second Quarter earnings season, were moving into that retailfocus retailfocused, end of it now. 95 of the s p 500 companies have already reported. The names now are in some of the riskier parts of the spast. We know retail has been under tremendous pressure against that backdrop. Lets get out to Morgan Brennan now with results from candy crush maker king digital. Morgan, what happened . Well, were looking at the numbers right now. Earnings per share 59 cents. Thats in line with expectations from the street, but heres where it gets a little not so good. Adjusted revenue 594 million. Thats versus street expectations of 608 million. Gross bookings 611 million. Thats light. Thats less than the 640 million that was expected. Also, daily active users, 138 million. The street had been expecting 155 million. Were also light on monthly active users. Looking at these numbers, also reducing outlook for the full year, and it looks like gross bookings are set to decline coming into the current quarter, q3. One bright spot, 150 million special dividend has been announced. Looking at the stock, its trading down about 18 in the afterhours, kelly. Back to you. All right, morgan. Thank you. We want to get thoughts from lance umenoff of national, who joins us to respond. Lance that active users generally, daily active users, i should say, looks well below estimates. Yeah. I think this is whats tough for them. You know, they said that theyre really hurting on the facebook side. And you know whats funny is every day i get requests from friends to join them and play candy crush saga and im not interested. And i think, you know, its not the newest thing. And with these games, its what is the newest thing. And people can move on. The games are all very similar, so its pretty easy to supplant it with another one. As i thought about this, i know that the key is the active users. They have to continue to grow or replace it with brand new games. So, notable here, obviously, theyve got the other games are moving in, they also have an acquisition that they announced, which i think may be part of a way of bringing in new people who havent been introduced to their games. Interesting point. I guess no one here is interested in bubble witch 2 saga . Not me. No, were getting candy crushed here. I love the idea of the content space, but i think when you look at a king digital and a lot of these mobile makers who make these one hit wonders, they dont have the deep content bench that we see in activision, in ea, even at disney. And so, if youre going to be playing within the gaming space, i dont know why youd want to go with these mobile companies that have sort of everything hanging on one title and arent building up that property and that content to be evergreen. You just havent seen the Companies Make the leap and i dont think its a good longterm investment. I think thats absolutely right, and you only have to ask a 12yearold like my son, or im like you, i dont like the facebook. I give them all the time on facebook. I have no interest. And you look at what consumers appetite is for these games, its very shortlived. And so, you want to have a company that has a ton of content, a lot to choose from and a one hit wonder, why would you want to go that way . Did your son share or play candy crush at one point . I think he played it so briefly. His Attention Span is he might have tried it. Hes our new best indicator here. I know. Right now i try to hide the phone. Kevin, is this special dividend a mistake, 150 million . Absolutely its a mistake, and ill tell you why. This company should be using its currency, whether it be its stocks or whether it uses its cash to go and acquire content. I mean, everybodys focused on the blazing problem. Its all the revenues coming from one game. Theres so much risk in that. They got themselves public, try to use the paper to buy more developers. Putting the cash out tells me its endoflife story. They dont have better use for it but to return it to shareholders . Thats exactly why i asked you. Look, what i see is they did try to do two things. They tried to give the dividend, they also tried to expand with an acquisition, but ultimately i think what were seeing here is correct, that it is very difficult to tie people into the longterm just with these casual games, because there is not a richer story. Theres no idea of a true sequel. When you look at the big console gaming manufacturers, they make storybased games which lead to the next game. Absolutely right. So, king digital, just to update everybody, is trading down about 20 after hours. Under the 15 mark. I was just trying to refresh myself as to where it went public, at what price level. Were clearly under water, though, from that. And lance, again, this is going to speak to the demand well, we were talking a little bit about ipos earlier. There was one that was just pulled after being on the market for six days, unique story, but some of the smaller ones havent performed that well anyway. Do you think this feeds into that story . The idea that ipos are struggling in the tech space . I dont think so. I think this is unique to candy crush and king. If they had good products, products that would hold people in long term from multiple products in their line, i think they would do better. And maybe if they start acquiring things or look to acquire somebody who makes a richer Gaming Experience that isnt only predicated on powerups and better, more lives within a tiny game. I think lance hit on something important. This is a product company. This is not a robust company. Its not the type of company that should be a public company. This is a company that should be milked as a cash cow, perhaps sold into somebody elses content portfolio or just milk for that cash flow for as long as it is. It is a product line, and i think that investment banks should be really careful about taking these kinds of Companies Public to begin with. Carol mentioned ea and disney and i wonder what lance would choose as where do you go . Just looking at blue mobile, by the way, the kardashian game. Where should people be right now . Where should investors be looking . First of all, im not an investment guy, but all i can say is that you look for something that is going to have longterm possibilities. That is, you know, why do Companies Invest so much in franchises like harry potter and star wars . Because the lines go out in 100 different directions, there is so many different possibilities, so many brand expansions. And when i look at kings games, they all seem like the exact same game different characters. And brian kelly, though, isnt that one strategy that could have or maybe could still work for them . Im just going to bring up bubble witch saga 2 again. Maybe. Listen, i look at these companies, this and a couple of the other ones that are one hit wonders, theyre like biotech or pharma stocks, youve got to continually load that pipeline. What king has done by declaring that special dividend is they sort of told us, we cant find a new game. We cant find new content. Lets cash out. And youre seeing it in the stock price. Look it, it keeps going lower even though they announced a huge dividend. Id be very careful in this name. Do you have any ideas if they follow on from that as well . From what . That follow on from the way kings trading, or at least the way that its ideas, as youre suggesting, have run out here . Yeah, well, the followon to other companies . I think this is kingspecific, number one. And id be curious to see. I dont have my data with me right now, but who the largest shareholders of this are. It wouldnt surprise me if its part of the Management Team and this is one way to get the last little bit of milk out of the cow. All right. Well leave it there for now. Guys, thank you for your thoughts. Again, a tough move for king, which is down about 23 , almost 24 after hours. Brian kelly is coming up with the rest of the fast money crew at 5 00 p. M. Stick around to that. Theyll be talking to a top analyst about a new report that doesnt bode well for samsung and apples Global Market share when it comes to mobile. Dont miss that either. So, who has the bigger impact on the market right now . Is it russian president Vladimir Putin or fed chair janet yellen . The geopolitical threat today, a massive and mysterious convoy of trucks in ukraine. But yellen could royal the market if she raises Interest Rates too fast. The putin versus yellen takedown is next. Plus, jim cramer says theres a need for corporate takeovers right now. Theres really only one choice when youre faced with terrible growth conditions. Thats to take advantage of whats out there and make some acquisitions. Were going to talk about that. Also, candy crush maker king digital hammered after hours. Lots more coming up. Well be right back after a short break. You are watching cnbc, first in business worldwide. I make a lot of purchases for my business. And i get a lot in return with ink plus from chase. Like 50,000 bonus points when i spent 5,000 in the first 3 months after i opened my account. And i earn 5 times the rewards on internet, phone services and at Office Supply stores. With ink plus i can choose how to redeem my points. Travel, gift cards, even cash back. And my rewards points wont expire. So you can make owning a busines even more rewarding. Ink from chase. So you can. Start a team. Join a team. Walk to end alzheimers. Visit alz. Org walk today. Welcome back. Markets have been watching closely the tensions between russia and ukraine, especially today as a convoy of russian trucks headed toward the border, russia claiming humanitarian aid, but nobody has verified that. Markets moved lower this morning as a result. Jeff cox says even seeing that, markets still care more about the fed and janet yellen than anything Vladimir Putin is doing. He joins us along with Larry Mcdonald from new edge usa, who says no, its all about russia. Jeff, convince me this is a janet yellen market. They say the pen is mightier than the sword, but i also think that the Printing Press is mightier as well. If you put janet yellen and Boris Yeltsin in a ring of combat together, obviously, yeltsins a bigger guy, a meman, but moving the markets, its still about janet yellen. Look, the math is simple here. When theres a lot of fed liquidity like we had last year, we had a big market. When theres not much fed liquidity or less as we see this year, its a slower market. You know, when you look forward or when you look at things as they are now, if russia matters so much, if the middle east matters so much, as far as markets go, you would see a much bigger market move than you do now. This market is weathering the storm of geopolitics because the Printing Press is still going, Interest Rates are still near zero and Janet Yellens still in control. So, larry, make your case. Well, i think yeltsins in the grave, first of all. Im sorry. Im sorry. Yeah, hed be more fun if we had him in power right now. But i would say, Equity Investors that arent watching the credit markets are making a big, big mistake right now. Russias oneyear cds is trading up near 200 basis points in july, early july. It was down at 90. To start the year, it was at 60 bips. So, somethings wrong. Their cds is up 2 basis points for one year production . Somethings wrong there. Equity investors should watch that. Secondly, john martin, who runs our equity derivatives business pointed this out to me two weeks ago. The front months vix future has been bid up, and also the twomonth. So, investors are paying up for shortterm protection on the vix future curve. That also tells me theyre worried about something happening right now from russia. Yeah, and my apologies to mr. Putin, but i would for sure say maybe i should be apologipolapio yeltsin, actually. If you want to find dislocations in this market, theyre everywhere, but the big thing thats outweighing all this is sentiment. Theres a bubble of confidence in the market now. This market is totally convinced that the fed is in control. And until that reality sets back in, and i do think reality is coming, i still think janet yellen is your personal here. Im just going to bring in the panel. Kevin, which do you think matters more . I really think that russias the big story. And ill tell you why. Im a pragmatic value investors. I ask myself, where do the earnings come from the s p that i own . 47 coming from overseas. Much of that is europe. If putin keeps causing chaos into those markets, Business Leaders in europe and here stateside are going to pull their horns in. So, i start to worry about q1 earnings next year. Hes fully capable of having a lot of mischief in the winter when he can mess around with gas and oil supplies. He has a more he has more impact, more potential impact from me as an investor than any fed policy right now, because the feds pretty well spent their entire holster. Theyve shot all their bullets. Now mr. Putin can really cause some problems. Carol, sharon, do you disagree . I think theres a differential between what inv t investors should be concerned about and what they are concerned about. Absolutely. I think that the geopolitical outlook should be a bigger concern in the long term. However, the markets very shortterm focused and weve seen a lot of things that the market probably should have been focused on and its been entirely focused on the fed, and i dont see that changing any time in the near term, although that could have serious implications in the longer term. Totally agree. Sharon . I think longer term investors are just as concerned about all of it, and thats why many are paralyzed at this point and not sure where they want to put their money, keeping it either on the sidelines or keeping it just kind of where its been and not really ready to make one move one way or the other, because there is so much going on that theyre concerned about what to really follow next and what the next shoe is going to be thats going to drop on them. Yeah. Thats evidenced across in a number of ways, some people just staying out altogether, that. Where do we leave should we have people vote and see who wins . Jeff, larry, what do you think . Id say, you know, i would concur with our other guests that mentioned, you know, this isnt the 80s. This isnt the 90s, not even the 2000s. The u. S. As a percentage of global gdp is a much smaller player, so when things happen outside of the u. S. , as Equity Investors, you have to be aware of that. And in the 80s and 90s, you could ignore International Tensions and make a lot of money in the stock market. Its a different market today. Yeah, thats for sure. Well leave it there. Thank you, guys. Thanks, jeff. Sorry, got to jump. Loary, appreciate it. We have a market alert with dominic chu. Weve got cree moving lower after the Company Posted weakerthanexpected fourthquarter sales. In addition, its firstquarter guidance came in below wall streets expectations. You can see cree shares down about 6 . Also, jds uniphase moving lower as well. This is a fiberoptics component company. It posted betterthanexpected fourthquarter results, but its earnings and Sales Guidance for the First Quarter was shy of expectations. Those shares off their session lows, still down by 2. 5 . Now, a different story here for fossil, and this is a fashion accessory company. Its vacillating. Its moving higher a little bit. Well call it an upanddown move after posting betterthanexpected secondquarter results. You can see their shares down by about 0. 5 after being higher, kelly, earlier in the afterhours. Back to you. Thank you, dom. Well, bigger is no longer better in retail, at least according to walmart, target, best buy, just some of the names opening smaller Format Stores now. So, why is one retailer doing the exact opposite, more than doubling its Square Footage . The ceo of exploration xl will join us next. And a new survey showing 40 of American Workers would take less pay in exchange for a larger 401 k contribution from their employer. Were skeptical, so we want you to voice your opinion. Cnbc. Com vote. That poll will open in just a few moments. Drivers want to go further with their electrical vehicles. But you cant take a trip from lisbon to stockholm if you cant recharge along the way. The green emotion project, funded by the European Commission is using the ibm cloud to make this possible by creating a single charging and Billing Network across 28 countries. So drivers can travel as far as they want to go. Take your business further with the ibm cloud. The ibm cloud is the cloud for business. With all the opinions about stocks out there, how do you know which ones to follow . The equity summary score consolidates the ratings of up to 10 independent Research Providers into a single score thats weighted based on how accurate theyve been in the past. Im Howard Spielberg of fidelity investments. The equity summary score is one more innovative reason serious investors are choosing fidelity. Call or click to open your fidelity account today. People find out state farm does car loans as well as they do insurance, our bank is through. Good point. Grab an edge. Look theres two guys on the state farm borrow Better Banking sign. Nope for real theres two dudes on the state farm borrow Better Banking sign. [ reporter ] breaking news from the state farm borrow Better Banking sign. Were seeing two men that have climbed the borrow Better Banking sign gentlemen please get down from the state farm borrow Better Banking sign. Phil get the hose. Okay hes getting the hose. Alright, lets go. [ male announcer ] talk to a state farm agent about car loans that can save you hundreds. Thats borrowing better. Welcome back. Take a look at shares of king digital, down 22 afterhours. In case you missed it, that company just posting results that significantly missed street expectations, also paying out a special dividend that has many people wondering if it sees no Better Future use for its cash shares. At a time when many retailers are doing away with the brickandmortar model or shrinking stores, destiny xl is staying true to its name and going bigger. The speciality retailer of big and tall mens apparel is taking its 3,000squarefoot stores, expanding them to 6,000 square feet and adding a 12,000squarefoot location in manhattan. Here to explain why the chain is going against the retail grain in an exclusive interview is destiny xls ceo david levin. Welcome, david. Welcome. Thank you. So, people have joked a little bit that maybe this is just because you need more room for your bigger apparel. Why is it that youre going bigger here, that you think this format, this concept can work in todays market . Well, were trying to create a onestop shop for this guy where we can fully wardrobe him, and we have to cover a full gamete of customers. Our customers can be making 30,000 a year, 3 million a year, they could be 18, they could be 70. The only thing they have in common is theyre big and tall. So, to give this guy a full selection, a broad selection of brands, it really requires about 6,000 square feet to get everything we need in to fulfill this guys wardrobe needs. And when you say full service, do you mean youre actually going to go more towards a Service Model and not just one of selling the clothing . Well, were definitely moving towards service. We have extensive Training Programs for our salespeople. Its a twomonth program when they join the company, before they can even start working in their own store. Service is very key to us. It really connects with this guy. Hes got this is a guy whos been challenged to find clothes that fit him right. We have a lot of technology in our clothes that really offer great quality. So, it is definitely a model where were moving more towards service. Okay. Want to bring in the panel for their thoughts. Kevin, do you buy into this idea . Well, the question i ask, again being a numbers guy, on a gross margin per square foot business, when you double the size of your store, if im your investor, are you able to give me an accretive outcome . Am i going to make more money per square foot on a margin basis, because that sounds scary to me given the extra overhead. Absolutely. Because again, our stores at casual male, were averaging about 650,000 per store, and now the dxl stores are coming in at 1. 2 million, 1. 8 million, 2. 5 million, so were really getting the bang for our buck. The sales per square foot has been down opposed to a casual male store, but were getting doubledigit comps on an annual basis and anticipate that going up. The biggest factor were seeing in these stores is were getting 50 higher transaction rates than we got from the casual male stores. Thats a significant difference. Were gaining market share, were getting a bigger share of his wallet because this guys fully getting all the needs he wants on a shopping experience. David, this is carol roth. I commend you, first of all, on competing on Service Versus on price, because i think that there is a temptation by so many retailers to go in the other direction, but i have a question in terms of the core customer. When you come to service and value, you have to really focus on what that core customer wants. When i think about a man, theres usually two types of men, theres the one that wants to get in and out really quickly, then there are the ones that are kind of fancy and they like a little bit more of the attention. But why would they shop with you, perhaps, versus a nordstrom or a Neiman Marcus . For us, its strictly about the size selection. Nordstroms and Neiman Marcus, theyre not really catering to a guy of size, a guy whos over 63 or has a waist of a 42inch or greater. And the beauty of the dxl stores is previously we were mostly driven by our house brands, which were very proud of. We now have an extensive line of brands, over 40 brands, most of them exclusive. Every store has a Polo Ralph Lauren shop. We have michael kors, we have true religion, brooks brothers, tommy bahama. I could go on and on and on. These were brands that were never available to a guy of size. And now, he is literally blown away when he comes in the stores and sees the selection. Casual male had 600 choices. The xl stores have over 2,000 choices. Wow. Sharon . Let me ask you this question. This is sharon epperson, married to one of those guys whos 65, and ive been in your stores for holiday shopping. But again, those brands at the time years ago were not available. How are you going to let this guy know that youre now offering these types of brands and let them know thats a completely different store . What youre describing is not the store i walked into. Its apples and oranges. And look, weve made a decision to invest quite a bit in marketing in the first years to raise the awareness, to get the traffic in the stores. Once we get them in the first time, we own them. These customers are coming back 80 to 90 return rates for these customers. They love what theyre seeing. But it costs money. Were starting with a new name, dxl, that has very little or no recognition when we started, and were on tv, were on radio. Weve increased our Marketing Budget to 7 of sales versus 4 of sales. Were going to do this for a few more years until we get that recognition level up. But the beauty of our brand is that its a great experience. Word of mouth goes around. These guys talk to their friends. Fair point. David, we have got to go, but my last question would simply be the effect that retailer chains have been battling. Youll have people come in the store, be surprised, maybe buy a few things, but Going Forward do they instead start to use it as more of a showroom . I think were in a good place right now. Our Internet Business is extremely strong. Were driving a lot of traffic from the internet into the stores. These guys want to see what the experience is all about once theyre in the store. And you know, internet for us is 20 of our revenue already, and thats with a large brickandmortar base. Thats a very High Percentage of sales. All right, well be watching to see if you can pull this one off. Sending my guy there. A lot of Square Footage out there that can potentially be absorbed as destination xl expands. Thank you, david levin, ceo. And a story we continue to follow, the embattled head of the department of Veterans Affairs is continuing to remove and punish employees accused of manipulating veteran data at two va facilities featured in a cnbc exclusive investigation. Dina has the details. Kelly, the only thing the va is saying publicly is that they are proposing the removal and disciplinary actions against six employees who manipulated data in the cheyenne, wyoming, and ft. Collins, colorado, vas. Now, although this statement is the first of its kind, we dug a little deeper and found that no one besides the va and the va Inspector General actually knows what that means. The va will not tell the media nor the House Committee on Veterans Affairs exactly how they plan to actually punish these employees or whether anyone will be fired. Now, heres what we do know. One of the individuals exposed in our report for personally changing thousands of Veterans Data was allowed to retire. She made over 95,000 last year and congressional sources tell us that she will be collecting a pension as well. Now, the Cheyenne Va Medical Center hospital director who also knew about the issues based on the documentation that we obtained is still employed at that va facility. Now, va will not comment on any of the specifics, citing privacy laws when it comes to federal employees. So once again, were hiting a wall. Were trying to get answers. Accountability is a huge issue here. It always has been for years with this department. And of course, you can see more about that in our documentary about the crisis at the department of Veterans Affairs. Just go to investigationsinc. Cnbc. Com. Kelly . Dina, important work. Thank you very much. Whats it going to take for this market to pick up again . Our jim cramer has an idea. Takeovers need to happen because takeovers can spur the growth thats required to really ignite the stock market cant do it alone with the economy. Up next, well discuss whether making deals is the only thing that can really send stocks to new highs. And would you trade a higher pay for a higher employer contribution to your 401 k . More than half of americans said they would. You can weigh in at cnbc. Com vote and wait to see what the panel says about this. We needed 30 new hires for our call center. Im spending too much time hiring and not enough time in my kitchen. [ female announcer ] need to hire fast . Go to ziprecruiter. Com and post your job to over 30 of the webs leading job boards with a single click; then simply select the best candidates from one easy to review list. You put up one post and the next day you have all these candidates. Makes my job a lot easier. [ female announcer ] over 100,000 businesses have already used zip recruiter and now you can use zip recruiter for free at a special site for tv viewers; go to ziprecruiter. Com offer2. At a special site for tv viewers; so i can reach ally bank 24 7, but there are24 7branches . Its just im a little reluctant to try new things. Whats wrong with trying new things . Feel that in your muscles . Yeah. I do. Try a new way to bank, where no branches equals great rates. It can help your business save money. False. The truth is when you compare our Fastest Internet to the fastest dsl from the phone company, comcast business gives you more for your money. Why pay more for less . Call today for a low price on speeds up to 150mbps. And find out more about our twoyear price guarantee. Comcast business. Built for business. If you dont think the economy can drive the stock market higher, well, our own jim cramer has a solution. Take a listen. Takeovers need to happen. Takeovers need to happen because takeovers can spur the growth thats required to really ignite this stock market the simple fact is that growth is still slow all over. As stanley fischer, the feds vice chairman and by far my favorite central banker said today when he talked about disappointing growth in the worlds economies, theres really only one choice when youre faced with terrible growth conditions, and thats to take advantage of whats out there and make some acquisitions. And jim rattled off a list of companies and sectors where this could happen. So, are mergers and acquisitions the only way for companies to spur growth in todays economy . With us now is Michael Nemeroff along with the panel. Michael, good to see you. First of all, at the beginning of the year, a lot of people were skeptical that this longforetold m a boom was going to happen. Now it seems its really starting to happen, isnt it . Yes, it really is. The strategic acquirers have upped the game. Everybodys jumping into the pool. If youre not growing by acquisition, you have to slog through organic growth. Its not exciting to investors. So, virtually every household name that you see has jumped on the pile and is starting to participate in the acquisition game, as mr. Cramer said. And i want to get into some of those names in a second, but to bring this back to the economy, this is not actually, or is it, a great reflection of the economy . Well, i think it is a reflection of outlook of the economy. Boards and ceos of Large Public Companies dont typically get into the acquisition game unless they feel comfortable that good things are ahead in the u. S. Economy and the global outlook. So, even if the economy seems like its slow to grow, the trend line in corporate boardrooms and the advice being given by Investment Bankers is growth is Going Forward in the world, in the united states, theres less political risk, theres less regulatory risk. And as a result, acquisitions happen at these levels. Yeah, and were starting to see some huge ones. Carol . Michael, as a former investment banker and my husbands a current m a banker, when were talking to boards, particularly with middle market companies, a lot of the geopolitical outlook doesnt come into play or is a factor. One of the things that were looking at is synergies, bri bringing two companies together, seeing what kind of overhead we can cut out. To me, thats not necessarily a good sign for the economy. It says the economy is probably good enough, the capital availability is out there, capitals at a low cost and there are opportunities to consolidate and perhaps take some overhead out of the equation. And you mean people. I mean people and plants and the like. Well, thats correct. In the middle market, which is largely driven by private equity and some strategic acquisition, the ton of cash available, the incredibly historically low financing opportunities that are out there are really driving those deals. A lot of its private equity. But youre exactly right, the ability to ring synergies and more profits out of the same thing is driving a lot of growth and a lot of boards and ceos believe if they dont participate, theyre going to lose ground to their neighbors in these converging industries. Right. Im curious, kevin, what you think about this as a strategy for investing. A lot of people traditionally play in small caps because they thought they might get a good kind of takeout in one of those names, but thats a little bit risky. It amounts, more or less, to a gamble. Is this good for the market generally . Because in the past, and again, this time its been so far a little bit different, but a lot of times, the acquirer would get hurt on some of these big plays. Ive never been a big believer in selling synergy as a return to merge who companies and cutting costs, because really, youre making an excuse that you cant grow on your own, so thats problematic. And i will say, and i agree with what we just spoke about on private equity, theres billions on the sidelines, but having invested with private equity, beside them and with them for decades now, ive learned a very important lesson. The funds that actually make most of the money are at a vintage when youre getting assets at a very low price. And i dont really find assets are particularly low priced anymore. When we were coming out of the chaos of 2008 and 2009 and you look seven years, eight years, nine years hence from now, those are the deals that have made the most money for shareholders. Absolutely. Buying with private equity and cheap leverage today is not going to give you the doubledigit returns you expect. My only hope for all of this m a activity is that it spurs the animal spirits that get me from a 17 price multiple to a 2021 by the end of the year. Then youre going to see a really happy kevin oleary. A lot of other investors, too, sharon, perhaps. I just wonder how feasible that is and what our guest would say about that, because a lot of retail investors, average investors looking at this activity, and when these deals are announced, potentially, and then they dont come through, thats when a lot of panic happens. And some of the tried and true names that they may be in, theyre wondering should they still be there. So, that creates a lot of concern, i think, among many average and longterm investors about how do you actually play in this game. If youre not in the private equity space. Speaking of which, michael, some of the blue chip names that are ones jim was talking about, a lot of big, wellknown consumer companies, perhaps some of the tech names, too. If you own lets just call it the dow, for example is this going for you to be a source of another leg up or is it something you should be concerned about if some of these acquisitions arent strategically sound . Well, i think investors are finding the acquisition to driving price as well. I think for the first time in a long time, the Investor Community has been reacting favorably on a couple days notices after deals of the acquirers, which hasnt happened in a long time, since like 2007. So, if you look at companies that have been relying on stock buybacks, their dividends as their way to grow and use cash, using cash for acquisitions might make a lot of sense for their Investor Base and their investors are demanding it in a lot of cases. Yeah. Great point. Thank you, Michael Nemeroff from vetter price. Appreciate it. Theyre back. Despite less than sizzling sales, burger king is bringing back chicken fries to its menu. People were ordering the stock up on cnbc. Com today. That tells you what kind of day it was. Well see if it cracks the hot list, next. And would you make a deal for a smaller paycheck if your employer had a larger match for your retirement account . Nearly half in one survey said yes. Your chance to vote is just ahead. Im only in my 60s. Ive got a nice long life ahead. Big plans. So when i found out medicare doesnt pay all my medical expenses, i looked at my options. Then i got a Medicare Supplement insurance plan. [ male announcer ] if youre eligible for medicare, you may know it only covers about 80 of your part b medical expenses. The rest is up to you. Call now and find out about an aarp Medicare Supplement insurance plan, insured by unitedhealthcare insurance company. Like all standardized Medicare Supplement insurance plans, it helps pick up some of what medicare doesnt pay. And could save you in outofpocket medical costs. To me, relationships matter. Ive been with my doctor for 12 years. Now i know ill be able to stick with him. [ male announcer ] with these types of plans, youll be able to visit any doctor or hospital that accepts medicare patients. Plus, there are no networks, and virtually no referrals needed. So dont wait. Call now and request this free decision guide to help you better understand medicare. And which aarp Medicare Supplement plan might be best for you. Theres a wide range to choose from. We love to travel and theres so much more to see. So we found a plan that can travel with us. Anywhere in the country. [ male announcer ] join the millions of people who have already enrolled in the only Medicare Supplement insurance plans endorsed by aarp, an Organization Serving the needs of people 50 and over for generations. Remember, all Medicare Supplement insurance plans help cover what medicare doesnt pay. And could save you in outofpocket medical costs. Call now to request your free decision guide. And learn more about the kinds of plans that will be here for you now and down the road. I have a lifetime of experience. So i know how important that is. Welcome back. More bad news for millennials today. A special report on the state of College Grads and jobs today was driving traffic to cnbc. Com. For more, allen wastler, the sites managing editor, has the hot list. This is a piece we picked up from our partners at global post, and they have done an impressive bit of journalism here. They used a profile of a young man trying to make ends meet in youngstown, ohio, a community thats traditionally relied on manufacturing and that kind of industry to move forward. And theyve used his profile to back into the whole problem of the 11 million underemployed folks out there, a large part of which are millennials trying to get out of school and get out, and you know, start making their way in life. And wonderful thing. Weve got lots of readers diving into it. But heres the melt ritric that caught my attention and made it on the hot list. People who are clicking on the story are basically reading the whole thing. A lot of times we get people who blast in, click, theyre in and out. This one, theyre reading the whole thing. How can you tell . Is it length of time or how much scrolling down . Length of time. And when i last checked, this was getting over two minutes, which doesnt seem like a lot, but in an internet age, thats forever, okay . I know a lot of my writers on my staff would die for it. Anyway, number two on the list was our wrapup of robin williams, the tragic situation. We had lots of guests on air today. Weve wrapped up all their comments about his contributions artistically and economically. And finally, you pegged it, chicken fries. Our readers are all about food. Burger kings bringing back the chicken fries, taking back the Mcdonalds Mcrib and wendys pretzel Bacon Cheeseburger tactic where they bring back old products and make them new again. There you go, kelly. I must be living in a cave because i didnt even know about the chicken fries. Oh, no. Chicken fries, if youve ever had one, its like ambrosia. Youll love it. With a good Barbecue Sauce . Oh, god, thats great allen, good to see you. Take care, kelly. Oh, man. Its always sort of todays sign of the apocalypse, two minutes. Anyway, when it comes to your 401 k , less could be more. More than 40 of americans in a new survey say they would take less pay if it means their employers would pour more into building a bigger nest egg for them. We want to know, would you trade your pay for a higher contribution . Head to cnbc. Com vote. Thats coming up next. And congress did not reauthorize the Exportimport Bank before it left for recess. Tomorrow well talk to the chair of that bank, fred hochberg, and well ask him what happens next. Moderate to severe is tough, but ive managed. I got to be pretty good at managing my symptoms, except that managing my symptoms was all i was doing. When i finally told my doctor, he said my crohns was not under control. He said humira is for adults like me who have tried other medications but still experience the symptoms of moderate to severe crohns disease. And that in clinical studies, the majority of patients on humira saw significant symptom relief. And many achieved remission. Humira can lower your ability to fight infections, including tuberculosis. Serious, sometimes fatal infections and cancers, including lymphoma, have happened; as have blood, liver, and nervous system problems, serious allergic reactions, and new or worsening heart failure. Before treatment, get tested for tb. Tell your doctor if youve been to areas where certain fungal infections are common, and if youve had tb, hepatitis b, are prone to infections, or have flulike symptoms or sores. Dont start humira if you have an infection. If youre still just managing your symptoms, ask your gastroenterologist about humira. With humira, remission is possible. But parallel parking isnt one you do a lof them. Ings great. Youre either too far from the curb. Or too close to other cars. Its just a matter of time until you rip some guys bumper off. So, here are your choices take the bus. Or get Liberty Mutual insurance. For drivers with accident forgiveness, Liberty Mutual wont raise your rates due to your first accident. See Car Insurance in a whole new light. Call Liberty Mutual insurance. Could help your business didavoid hours of delaynd test caused by slow internet from the phone company . Thats enough time to record a memo. Idea for sales giveaway. Return a call. Sign a contract. Pick a tie. Take a break with mr. Duck. Practice up for the business trip. Fly to florida. Win an award. Close a deal. Hire an intern. And still have time to spare. Go to comcastbusiness. Com checkyourspeed if we cant offer faster speeds or save you money well give you 150. Comcast business. Built for business. Welcome back. Its a survey we have been following all hours. Fidelity investment have a larger contribution to their 401 k plan, would you trade your salary in for more contribution to your 401k . Ken tweets, no, he wouldnt take it. The match is small and doesnt help for a cost of living hike. Trade tweets, unless you are maced out on contribution, why would you take pay for a few percentage point better . Tom trooets tweets, i made enough money so i would. People that live paycheck to paycheck couldnt. Panel, what say you . I dont think most people dont understand how the whole things thing works. When i talk to people how much they can contribute overall to their 401k, a lot dont know if they are 50 or older an extra 50 on top of that, they dont know what the contribution limits are. They may not realize their Company Offers a matching contribution. If they do, they may not be contributeing enough to get to the max. Im curious how many people are contributing to their 401k or say this sounds like a good idea. Part one sounds leak you are doing what you can. Part two, a lot of people after the financial crisis saw their employers cut that match when times got tough. They havent necessarily reinstated that. But they have. Fidelity is saying 80 of the company that it runs plans for, thats some 20,000 companies, so were talking 16,000 companies, they do have a matching contribution they offer their employees, so a lot of folks may not realize, yes, it was cut after the financial crisis. Now its back. This survey may have been more of a marketing too many for that as well. A lot of entrepreneurs, including myself, make a trade similar to this. Because you can have a Profit Sharing plan that allows you instead of taking money out as part of your salary or bonus to put more than that away. I think the maximum this year is up to Something Like 52,000 depending on the amount of earning. So there are a lot of entrepreneurs, if you are a Small Business owner out there, you can be looking into these Profit Sharing plans, you can basically do these matching for yourself. Thats a great point. Lets say i take home 1 no,000 month and have the choice of 50 in salary or putting 100 away or 50 away into my 401k. Is there a question which within i should take. I like this deal. I dont want you spending that on a new pair of shoes, i want to force you to save it. I spend a fair amount of my time talking to people in mid20s trying to find their way in business and their careers and the one thing we havent taught them at a younger age is you have to start taking care of yourself for the future. If you start at an early age and i dont care what the metric is that forces you not to spend it and let it start to become basically to collect interest. A lot say its that payment, between that and my car payment and my rent. And their iphones and deluxe iphone and iphone accessories. Look, first of all, every, you are getting into a very slippery slope. Most people are spending too much and they cant afford, including getting degrees that dont have any value in terms of generating income. Thats whole different discussion. No, but you are right. Most people, go to a trade school. You should be learning how to weld rather than getting a leb ral arts degree. Im sorry to tell you, but thats true. Its discipline and it taxi that money away from you. If you have a smaller amount, you find a way to make it work. The results of the survey here i think is now closed. 15 would not trade their higher pay for a 401k. People dont understand what this means from the employer perfect e specttive, that might help to build some loyalty in the employee as well. Maybe they want me to be. You start off at a high salary. It may not go very far, maybe you will not. And it will be better to have that money contributing as opposed to stock options. Its free money. You definitely dont want to give it up. Then will you have more money in the long run. People have to be sophisticated. Definitely for entrepreneurs, doing this is a no brainer. Thanks, guys. Up next, a flurry of earnings, cisco among the big names posting results. A panel will tell us whats on their radar when we come right back. Just take a closer look. It works how you want to work. Welcome back. Time to get some final thoughts. We cant stop talking about 401ks, kevin, what are you thinking about . Im looking for any signals capex is slowing anywhere in the economy, whether it be tech or spending or any sector of the defense. Because that will tell me what the rest of the year has happened. Has anything scared a ceo from making an expenditure . I want to know i got my buck 15 on the s p earnings and ill be okay. It will be a steeper climb after this candy crush. The maker of the game after the bell missed expectation shares after hours ouch. Guys. Im going up the income statement, kevin is looking at eps. Im looking at margins. I want to hear from people like walmart and nordstrom what theyre saying about mar jen pressure, something i will be keeping a very close eye on in the coming dis and weeks and watching destiny xl. Im also watching these gas prices, im fascinated at the fact they keep falling. The consumer is rather pessimistic. What is this going to mean ultimately down the road in terms of companies as well, it will be interesting to see diesel, jet fuel at the prices for four years for the summer months. Amazing, time for backtoschool season for parts of the country as well. Thank you, everybody, stick around, tune into cnbc tonight. Kevin oleary is on for shark tank tuesday. Fast money is coming up in a few moments. Sarah eisen, whats on tap . Were going to talk about apple and samsung, potentially losing market share big time, some of the local players in chosen without the right price points. The traders have opposing views on apple. We are going to have a debate, kelly. Good stuff. Over to you, guys. All right, fast money starts right now live from the Nasdaq Market site in new yorks times square, im sarah eisen in today for melissa lee. Our traders sim tee more, dan nathan, container feinerman, ryan kelly. Tonight, germany the once shining star of europe showing weakness after a new report indicated investment morale is at the lowest level since december, 2012. That sent the dax and germany and much of europe into the red. So is the u. S. Still the best pla is to invest right now